Tuesday, April 10, 2012

A Word About Outsourcing (ok ok fine, many words)

About an hour ago my sister asked me to do something that seemed fairly trivial; going to her friend's facebook page (http://www.facebook.com/DangerBuckShop), looking around a bit, dropping some 'likes' and whatnot. She also happened to throw in that I should maybe write something down or post some comments. Well I'll do her one better and put up an entire blog post in my own little (oft unread) corner of the net.

So the topic she threw at me was outsourcing, which seems to be a focal point for the blog/shop she recommended. I informed her that she might not like or want my opinion about it, but she kept pushing (damn stubborn Germans! wait...she's my sister...crap!), and after about 30 minutes of overly wordy text messages, I decided to put it all down here (and then gratuitously link/cross-post to http://www.facebook.com/DangerBuckShop for the childish attention I crave).

Let me start by saying I agree wholeheartedly with the message "Buy American". It is a good message, if a little cliche (but cliche is good, I mean, we ARE Americans...). Getting people to buy domestically made products is a worthy endeavor, even just getting people to think about the overall effects of their purchasing power is a good idea. The issue, in my eyes, comes down to effectiveness.

Ideally we'd all buy locally made products or at least domestically made, but there's a reason it doesn't happen (and doesn't work in our current situation). Sloganeering is fine to influence perceptions, but no amount of saying "Buy American" will change the economic realities people generally face when making non-essential purchases. I view campaigns like this with perhaps a much too skeptical eye, seeing wishful thinking and misguided (but not wrongheaded) efforts that don't get to the root of the problem.

I should mention at this point that I don't actually see outsourcing as a problem. Well, that's not entirely correct. Outsourcing is A problem, but certainly not THE problem. A heart attack caused by a side-effect of medication is definitely a problem, but it's not the problem that you were taking the medication to fix. So taking the original medication and throwing in some heart medication on top isn't really the right answer. But then, neither is switching medications to one that you can't afford (yes, it's an answer, but it's not the RIGHT answer). What's the solution? Well obviously you need better medication that's affordable. Why can't we have that?

Obviously because the government doesn't want you to have access to affordable, effective medication. (Wait, is this still part of the medicine analogy or a seperate point? YES) Now I understand the rationale behind why the government (FDA) would prevent generic drugs from hitting the market is massive amounts. Drug companies have spent hundreds of millions experimenting with and developing new treatments, and having some avenue to recoup these costs (never mind the tax deductibility of it) isn't a terrible thing, at least, not right away. Unfortunately this thinking, if allowed to fester, has a tendency to produce monopolies. No competition means the company can set the price of their life-saving medication at whatever they want, and by God the people will pay it (or their insurance companies, which is just another way of saying people will) because who wouldn't pay to save their own life or that of a loved one?

The point I'm making (yeah, I digress a lot) is that the government does something first to protect one entity, but doing so too long or too much hurts many others.

So back to the main point (what was it again? outdoorsmen? oh yeah, outsourcing) of outsourcing being a symptom or side-effect as opposed to the problem.

To stick with the medical analogies, you have to understand the cause of the illness or no amount of treatment will keep someone from catching the same damn thing again. So when people look at outsourcing and say it's a problem we need to fix, they're not focused on the right target. Outsourcing is a problem that will fix itself if the underlying issues are corrected. If you keep catching colds and never wash your hands, then it's fair to say you'll be sick forever unless you change your behavior. Not to say that washing your hands will keep you from catching a cold, but it'll be a lot less common.

So it comes down to the government being the issue. Outsourcing is the cold, while onerous government regulation and taxation are the lack of hand washing. Notice how I added an adjective there to show I'm not totally against regulations or taxes, just smelly ones...er...overbearing, punitive and/or destructive ones.

If you understand the government doesn't create anything, just regulates and destroys, then you're halfway there. Not that some of the destruction isn't warranted, but there needs to be moderation.

Raising taxes on corporations, even ones that are painted as "not paying their fair share" or "wallowing in obscene profits" (fyi, oil companies make about five cents profit off each gallon of gas, compare that to the 40 cents in taxes and you have to wonder who really should be demonized), is really silly if you understand business at all, and I do mean AT ALL. One of the most basic principles in business is that if the cost of doing business goes up, then the cost of doing business with them will too. Even if a company/corporation is making a profit these days, they're more likely to raise prices or decrease product value/weight to accommodate higher taxes. After all, if there's no profit motive, why open a business at all? Unless you're a fan of treading water for the sake of treading water.

Oi, one day I'll stop going on with random rambling, but not today!

Ok ok, back to outsourcing and how this all ties in.

If the government increases regulations and taxes on companies, then it's perfectly natural for that company to find ways to decrease their costs. In this globalized economy that often means outsourcing. If you want the government to force companies to bring jobs back to America, or want them to do so through even greater regulation and punitive taxation, then congratulations; YOU'RE A FASCIST. Don't get offended, be proud! You want the government to collude with and even direct the means of production which are at least nominally privately-owned, so stand strong with your fascist tendencies.

But that's not really the way to go about it, now is it? If all you'll ever see is the stick, then who cares how many carrots they're hiding? Punishing companies through regulation and taxation for outsourcing is ridiculous since those are typically major factors in why they outsourced in the first place.

Yes, wages in America are a lot higher than most of the outsourcees' native countries, and that has a corresponding increase in the price of goods, but people are generally fine with higher prices for what they expect to be better quality products. I won't delve into the union issue (since this post has already gone way too long) and higher wages pushing prices even higher with no increase in product quality, but that is certainly a factor in the outsourcing question.

Back again to the source of the issue! What drives companies to outsource? Duh, profit. What keeps them from doing their manufacturing in America? Duh, lower profits. How can we bring those jobs back to the states? Duh, by punishing the corporations and taking away all their profits. Oh wait, how about making it easier for them to profit from keeping those jobs here or repatriating them? Well hot damn, there's a novel approach. We've finally found the carrot!

Don't put that stick away just yet though. Just take it out of the government's hands and put it back where it belongs, in the hands of the consumers. As our country has drifted closer and closer to a crazy fasco-socialist conglomerate, we've (that's WE, as in WE THE PEOPLE) allowed the government to become the strong horse when dealing with businesses. The end consumers, who in a truly capitalist system are the be all and end all of business decisions, no longer wield the power to get companies to change their practices.

Boycotts can lead to bailouts, and politics trumps profits these days. When businesses can't fail, but also can't succeed, then the system is broken. If you're going bankrupt, ask for a bailout, but by God don't make too much money (by whose definition?) unless you're the right kind of political animal or you'll pay for it!

Once again for those who missed it, the government doesn't create, it just regulates and destroys. For once it would be nice if the federal government would engage in a little creative destruction on itself. Lowering the highest corporate tax rate in the world might be a good start, with the commensurate/above and beyond cuts in government spending to keep the national debt from spiraling even further into the bottomless pit. Amending/abolishing laws and regulations that in effect hamstring domestic businesses would also go a long way to restoring sanity.

This brings us full circle to the whole "Buy American" thing. Is it a good message? Yes. Is it the answer to outsourcing? No, not as long as there are no incentives to succeed and even less incentives to keep from failing. Could it be the stick that works in conjunction with the carrot of a friendlier business environment to keep the marketplace stable? Absolutely, because it would be the choice of the consumers making the purchases that decide whether a business succeeds, not a group of corrupt politicians trying to hide how much money they've taken to maintain the status quo.

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